earnings release conference calls2.q4cdn.com/591876415/files/doc_presentations/... · q4 2015...

© 2016 Belden Inc. | belden.com | @BeldenInc

PROPRIETARY AND CONFIDENTIAL. COPYING RESTRICTED. FOR INTERNAL USE ONLY.

February 9, 2016

4th Quarter 2015 Earnings Release Conference Call

© 2016 Belden Inc. | belden.com | @BeldenInc 2

Our commentary and responses to your questions may contain forward-lookingstatements, including our outlook for the 2016 first quarter and full year. Forward-looking statements include projections of sales, earnings, general economic conditions,market conditions, working capital, market shares, free cash flow, pricing levels, andeffective tax rates. Belden undertakes no obligation to update any such statements toreflect later developments, except as required by law. Information on factors that couldcause actual results to vary materially from those discussed today is available in thepress release announcing 2015 fourth quarter results, our most recent Annual Report onForm 10-K as filed with the SEC on February 23, 2015 (including those discussed under“Risk Factors” in Part I, Item 1A and in “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” in Part II, Item 7), and our subsequentfilings with the Securities and Exchange Commission.

Safe Harbor Statement

Non-GAAP MeasuresOn this call we will discuss some non-GAAP measures (denoted by footnote) indiscussing Belden’s performance, and the reconciliation of those measures to the mostcomparable GAAP measures is contained within this presentation or available at ourinvestor relations website, investor.belden.com.


• Delivered revenues of $602.5 million;

• Expanded gross profit margins to a record 43.1%, up 570 basis points year over year;

• Generated record EBITDA of $114.6 million, an improvement of 14.9% year over year, representing 19.0% of revenue in the quarter;

• Achieved record EPS of $1.63 in the quarter, increasing more than 31% from the prior year period; and

• Paid down $150 million of long-term debt during the period.

Q4 2015 Highlights

Adjusted results. See Appendix for reconciliation to comparable GAAP results.


• Achieved revenues of $2.36 billion, an increase of 7.4% year-over-year in constant currency;

• Expanded gross profit margins to a record 41.6%, increasing 460 basis points from 37.0% in the year-ago period;

• Drove EBITDA margins to a record 17.0%, increasing 150 basis points from 15.5% in the year-ago period; and

• Delivered record adjusted EPS of $4.98, up 17.7% over last year’s $4.23.

FY 2015 Highlights



4th Quarter Segment Overview

Revenue $48.9M

EBITDA Margin 30.0%

Revenue $62.8M

EBITDA Margin 18.4%

Revenue $109.4M

EBITDA Margin 16.7%

Revenue $141.8M

EBITDA Margin 16.8%

Revenue $239.5M

EBITDA Margin 19.5%Broadcast

EnterpriseConnectivity

IndustrialConnectivity

IndustrialIT

NetworkSecurity

Camera Mounted

Fiber Solutions

Signal Processing

& Routing

Precision A/V

Cable and Connectivity

Monitoring

Systems

Automation Playout

& Branding

Systems

Industrial and

I/O Connectors

Industrial

Cables

IP/Networking

Cables

I/O Modules/

Active

Distribution

Boxes

Customer-Specific

Wiring

Copper and Fiber

Connectivity

Racks and

Enclosures

Ethernet,

Fiber Optic and Coaxial

Cables, Security

& RoutingWireless Switches Connectivity

Vulnerability AssessmentTargeted Attack Detection Threat Analytics



Q4 2015 Financial Summary


Q4 2015 Q3 2015 Q4 2014

Revenue $602.5M $590.1M $613.7M

Gross profit $259.6M $240.7M $229.4M

Gross profit percentage 43.1% 40.8% 37.4%

EBITDA $114.6M $97.5M $99.8M

EBITDA percentage 19.0% 16.5% 16.3%

Income from continuing operations $69.3M $48.9M $ 53.9M

Income from continuing operations per diluted share $1.63 $1.14 $1.24


Segment Results

Adjusted results. See Appendix for reconciliation to comparable GAAP results.(1) Consolidated results include income from our equity method investment.

BroadcastEnterprise

ConnectivityIndustrial

ConnectivityIndustrial IT

Network Security

Consolidated

Q4 2015

Revenue $239.5M $109.4M $141.8M $62.8M $48.9M $602.5M

EBITDA(1) $46.7M $18.3M $23.9M $11.5M $14.7M $114.6M

EBITDA Margin 19.5% 16.7% 16.8% 18.4% 30.0% 19.0%

Q3 2015

Revenue $228.1M $113.8M $147.7M $59.2M $41.4M $590.1M

EBITDA(1) $34.9M $18.2M $23.2M $10.5M $11.2M $97.5M

EBITDA Margin 15.3% 16.0% 15.7% 17.7% 27.2% 16.5%

Q4 2014

Revenue $253.2M $110.8M $173.7M $76.0M $613.7M

EBITDA(1) $43.4M $14.5M $26.5M $15.9M $99.8M

EBITDA Margin 17.5% 13.1% 15.2% 20.9% 16.3%


Q4 2015 Balance Sheet Highlights

Q4 2015 Q3 2015 Q4 2014

Cash and cash equivalents $217M $242M $741M

Inventory turns 7.1x 6.7x 6.9x

Days sales outstanding 62 days 63 days 59 days

PP&E turns 7.7x 7.4x 7.7x

Total debt principal amount $1.75B $1.91B $1.77B

Net Leverage 3.6x1 4.0x 2.7x

(1) Net leverage calculated as (A) total debt less cash and cash equivalents divided by (B) trailing twelve months Adjusted EBITDA plus trailing twelve months stock based compensation expense plus trailing twelve months long-term incentive plan expense for certain acquired companies. The net leverage calculation for Q3 2015 includes Adjusted EBITDA for companies acquired in Q4 2014 and Q1 2015.


Cash Flow Highlights

(1) Adjusted for non-recurring cash payments of $37.7M in 2014 ($15.9M in Q4 2014) related to the integration of Grass Valley. See Appendix for reconciliation to comparable GAAP results.(2) Capital expenditures, net of proceeds from the disposal of tangible assets. See Appendix for reconciliation.(3) Free cash flow is not a term defined by generally accepted accounting principles (GAAP) and our definition may or may not be used consistently with other companies that define this term.

See Appendix for reconciliation to comparable GAAP results.(4) Net of cash acquired.

Q4 2015 Q4 2014 FY 2015 FY 2014

Cash flows from operating activities $ 144.4M $ 145.2M(1) $236.4M $ 231.7M(1)

Less: Net capital expenditures(2) $ 15.5M $ 14.3M $ 54.4M $ 43.6M

Free cash flow (3) $ 129.0M $ 130.9M $ 182.0M $ 188.2M

Cash used to acquire businesses(4) $ 0.0M $ 34.8M $ 695.3M $ 347.8M

Share repurchases and dividends $ 2.0M $ 32.2M $ 47.4M $ 100.9M


Q1 2016(1)

• Revenue of $530 - $550 million

• Income from continuing operations per diluted share of $0.90 - $1.00

Outlook

2016 Full Year(1)

• Revenue of $2.295 - $2.345 billion

• Income from continuing operations per diluted share of $5.10 - $5.40

(1) Adjusted Outlook. See Appendix for reconciliation to comparable GAAP outlook.

© 2016 Belden Inc. | belden.com | @BeldenInc 11© 2015 Belden Inc. | belden.com | @BeldenInc

Questions?


Appendix


December 31, 2015 December 31, 2014 December 31, 2015December 31, 2014

Revenues $ 597,244 $ 608,910 $ 2,309,222 $ 2,308,265 Cost of sales (347,127) (391,295) (1,391,049) (1,488,816) Gross profit 250,117 217,615 918,173 819,449 Selling, general and administrative expenses (130,405) (128,091) (527,288) (487,945)Research and development (37,312) (31,281) (148,311) (113,914)

Amortization of intangibles (25,701) (15,687) (103,791) (58,426)Income from equity method investment 311 715 1,770 3,955 Operating income 57,010 43,271 140,553 163,119 Interest expense, net (26,582) (23,314) (100,613) (81,573) Income from continuing operations before taxes 30,428 19,957 39,940 81,546 Income tax benefit (expense) 19,228 (4,543) 26,568 (7,114) Income from continuing operations 49,656 15,414 66,508 74,432 Income (loss) from discontinued operations, net of tax - 579 (242) 579

Loss from disposal of discontinued operations, net of tax - - (86) (562) Net income 49,656 15,993 66,180 74,449 Less: Net loss attributable to noncontrolling interest (24) - (24) -

Net income attributable to Belden stockholders $ 49,680 $ 15,993 $ 66,204 $ 74,449

Weighted average number of common shares and equivalents: Basic 41,978 42,796 42,390 43,273 Diluted 42,482 43,516 42,953 43,997

Basic income (loss) per share attributable to Belden stockholders:

Continuing operations $ 1.18 $ 0.36 $ 1.57 $ 1.72 Discontinued operations - 0.01 (0.01) 0.01

Disposal of discontinued operations - - - (0.01) Net income $ 1.18 $ 0.37 $ 1.56 $ 1.72

Diluted income (loss) per share attributable to Belden stockholders: Continuing operations $ 1.17 $ 0.35 $ 1.55 $ 1.69

Discontinued operations - 0.01 (0.01) 0.01 Disposal of discontinued operations - - - (0.01)

Net income $ 1.17 $ 0.36 $ 1.54 $ 1.69

Dividends declared per share $ 0.05 $ 0.05 $ 0.20 $ 0.20

Three Months Ended Twelve Months Ended

(In thousands, except per share data)

Statements of OperationsUnaudited


Operating Segment InformationBroadcast Solutions

Enterprise Connectivity

Industrial Connectivity

Industrial IT

Network Security Total Segments

For the three months ended December 31, 2015

Segment Revenues 239,539$ 109,440$ 141,801$ 62,776$ 48,948$ 602,504$

Segment EBITDA 46,702 18,294 23,863 11,522 14,707 115,088

Segment EBITDA margin 19.5% 16.7% 16.8% 18.4% 30.0% 19.1%

Depreciation expense 4,284 2,912 2,705 580 1,019 11,500

Amortization of intangibles 12,733 134 725 1,490 10,619 25,701

Severance, restructuring, and acquisition integration costs 10,535 (109) 3,174 167 (130) 13,637

Purchase accounting effects of acquisitions 132 52 67 32 42 325

Deferred gross profit adjustments (343) - - - 6,793 6,450

For the three months ended December 31, 2014

Segment Revenues 253,236$ 110,780$ 173,707$ 76,004$ -$ 613,727$

Segment EBITDA 44,428 14,463 26,466 15,915 - 101,272

Segment EBITDA margin 17.5% 13.1% 15.2% 20.9% n/a 16.5%

Depreciation expense 5,207 3,111 3,153 622 - 12,093

Amortization of intangibles 12,776 153 434 2,324 - 15,687

Severance, restructuring, and acquisition integration costs 13,796 1,271 1,703 5,248 - 22,018

Purchase accounting effects of acquisitions 1,116 322 795 434 - 2,667

Deferred gross profit adjustments 4,055 - - - - 4,055

For the three months ended September 27, 2015

Segment Revenues 228,097$ 113,773$ 147,702$ 59,184$ 41,359$ 590,115$

Segment EBITDA 34,880 18,232 23,225 10,466 11,240 98,043

Segment EBITDA margin 15.3% 16.0% 15.7% 17.7% 27.2% 16.6%

Depreciation expense 4,261 2,922 2,810 570 1,255 11,818

Amortization of intangibles 12,647 136 799 1,480 10,607 25,669

Severance, restructuring, and acquisition integration costs 13,722 192 118 54 57 14,143

Deferred gross profit adjustments 419 - - - 10,909 11,328

(In thousands, except percentages)

Unaudited


Operating Segment Reconciliation to Consolidated Results

December 31, 2015 December 31, 2014 September 27, 2015

Total Segment Revenues $ 602,504 $ 613,727 $ 590,115 Deferred revenue adjustments (5,260) (4,817) (10,849)

Consolidated Revenues $ 597,244 $ 608,910 $ 579,266

Total Segment EBITDA $ 115,088 $ 101,272 $ 98,043

Income from equity method investment 311 715 348

Eliminations (776) (2,196) (931)

Consolidated Adjusted EBITDA (1) 114,623 99,791 97,460

Depreciation expense (11,500) (12,093) (11,818)

Amortization of intangibles (25,701) (15,687) (25,669)

Severance, restructuring, and acquisition integration costs (13,637) (22,018) (14,143)

Deferred gross profit adjustments (6,450) (4,055) (11,328)

Purchase accounting effects related to acquisitions (325) (2,667) -

Consolidated operating income 57,010 43,271 34,502

Interest expense, net (26,582) (23,314) (25,416)

Consolidated income from continuing operations before taxes $ 30,428 $ 19,957 $ 9,086

(1) Consolidated Adjusted EBITDA is a non-GAAP measure. See Reconciliation of Non-GAAP Measures for additional information.

(In thousands)

Three Months Ended

Unaudited


December 31, 2015 December 31, 2014

(Unaudited)

Current assets:

Cash and cash equivalents 216,751$ 741,162$

Receivables, net 387,386 379,777

Inventories, net 195,942 228,398

Other current assets 43,085 42,656

Total current assets 843,164 1,391,993

Property, plant and equipment, less accumulated depreciation 310,629 316,385

Goodwill 1,385,115 943,374

Intangible assets, less accumulated amortization 655,871 461,292

Deferred income taxes 34,295 60,652

Other long-lived assets 86,767 86,974

3,315,841$ 3,260,670$

Current liabilities:

Accounts payable 223,514$ 272,439$

Accrued liabilities 323,249 248,072

Current maturities of long-term debt 2,500 2,500

Total current liabilities 549,263 523,011

Long-term debt 1,750,521 1,765,422

Postretirement benefits 105,230 122,627

Deferred income taxes 46,034 11,015

Other long-term liabilities 39,270 31,409

Stockholders’ equity:

Common stock 503 503

Additional paid-in capital 605,660 595,389

Retained earnings 679,716 621,896

Accumulated other comprehensive loss (58,987) (46,031)

Treasury stock (402,793) (364,571)

Total Belden stockholders’ equity 824,099 807,186 Noncontrolling interest 1,424 -

Total stockholders' equity 825,523 807,186

3,315,841$ 3,260,670$

(In thousands)

ASSETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

Balance Sheet


December 31, 2015 December 31, 2014

Cash flows from operating activities: Net income $ 66,180 $ 74,449

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 150,342 102,162 Share-based compensation 17,745 18,858

Income from equity method investment (1,770) (3,955)

Tax benefit related to share-based compensation (5,050) (6,859)

Deferred income tax benefit (45,674) (17,796)

Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses: Receivables 6,066 (15,810)

Inventories 19,204 (2,260)

Accounts payable (38,907) 28,120 Accrued liabilities 59,214 (5,598) Accrued taxes 11,981 9,058 Other assets (3,070) 10,223 Other liabilities 149 3,436

Net cash provided by operating activities 236,410 194,028

Cash flows from investing activities:Cash used to acquire businesses, net of cash acquired (695,345) (347,817)

Capital expenditures (54,969) (45,459)

Proceeds from disposal of tangible assets 533 1,884

Proceeds from (payments for) disposal of businesses 3,527 (956)

Net cash used for investing activities (746,254) (392,348)

Cash flows from financing activities:Borrowings under credit arrangements 200,000 456,163

Tax benefit related to share-based compensation 5,050 6,859

Proceeds from noncontrolling interest 1,470 -

Debt issuance costs paid (898) (10,700)

Cash dividends paid (8,395) (8,699)

Withholding tax payments for share based payment awards, net of proceeds from the exercise of stock options (11,693) (11,708)

Payments under share repurchase program (39,053) (92,197)

Payments under borrowing arrangements (152,500) (2,500)

Net cash provided by (used for) financing activities (6,019) 337,218

Effect of foreign currency exchange rate changes on cash and cash equivalents (8,548) (11,040)

Increase (decrease) in cash and cash equivalents (524,411) 127,858

Cash and cash equivalents, beginning of period 741,162 613,304

Cash and cash equivalents, end of period $ 216,751 $ 741,162

Twelve Months Ended

(In thousands)

Cash Flow StatementUnaudited


Q4 2015 and FY 2015 GAAP to Non-GAAP Reconciliation

December 31, 2015 December 31, 2014 September 27, 2015 December 31, 2015 December 31, 2014

GAAP revenues 597,244$ 608,910$ 579,266$ 2,309,222$ 2,308,265$

Deferred revenue adjustments 5,260 4,817 10,849 51,361 11,954

Adjusted revenues 602,504$ 613,727$ 590,115$ 2,360,583$ 2,320,219$

GAAP gross profit 250,117$ 217,615$ 226,131$ 918,173$ 819,449$

Deferred gross profit adjustments 6,450 4,055 11,328 52,876 10,777

Severance, restructuring, and acquisition integration costs 3,024 7,388 3,166 9,364 20,665

Accelerated depreciation 50 255 75 225 255

Purchase accounting effects related to acquisitions - 133 - 267 8,433

Adjusted gross profit 259,641$ 229,446$ 240,700$ 980,905$ 859,579$

GAAP gross profit margin 41.9% 35.7% 39.0% 39.8% 35.5%

Adjusted gross profit margin 43.1% 37.4% 40.8% 41.6% 37.0%

GAAP operating income 57,010$ 43,271$ 34,502$ 140,553$ 163,119$

Amortization of intangible assets 25,701 15,687 25,669 103,791 58,426

Severance, restructuring, and acquisition integration costs 13,637 22,018 14,143 47,170 70,827

Deferred gross profit adjustments 6,450 4,055 11,328 52,876 10,777

Purchase accounting effects related to acquisitions 325 2,667 - 9,747 12,540

Accelerated depreciation 81 1,074 125 388 1,074

Total operating income adjustments 46,194 45,501 51,265 213,972 153,644

Depreciation expense 11,419 11,019 11,693 46,163 42,662

Adjusted EBITDA 114,623$ 99,791$ 97,460$ 400,688$ 359,425$

GAAP operating income margin 9.5% 7.1% 6.0% 6.1% 7.1%

Adjusted EBITDA margin 19.0% 16.3% 16.5% 17.0% 15.5%

GAAP income from continuing operations 49,656$ 15,414$ 14,811$ 66,508$ 74,432$

Operating income adjustments from above 46,194 45,501 51,265 213,972 153,644

Tax effect of adjustments (26,558) (7,043) (17,142) (66,777) (41,909)

Adjusted income from continuing operations 69,292$ 53,872$ 48,934$ 213,703$ 186,167$

GAAP income from continuing operations 49,656$ 15,414$ 14,811$ 66,508$ 74,432$

Less: Net loss attributable to noncontrolling interest (24) - - (24) -

GAAP income from continuing operations attributable to Belden stockholders 49,680$ 15,414$ 14,811$ 66,532$ 74,432$

Adjusted income from continuing operations 69,292$ 53,872$ 48,934$ 213,703$ 186,167$

Less: Net loss attributable to noncontrolling interest (24) - - (24) -

Less: Amortization expense attributable to noncontrolling interest, net of tax 5 - - 5 -

Adjusted income from continuing operations attributable to Belden stockholders 69,311$ 53,872$ 48,934$ 213,722$ 186,167$

GAAP income from continuing operations per diluted share attributable to Belden stockholders 1.17$ 0.35$ 0.35$ 1.55$ 1.69$

Adjusted income from continuing operations per diluted share attributable to Belden stockholders 1.63$ 1.24$ 1.14$ 4.98$ 4.23$

GAAP and Adjusted diluted weighted average shares 42,482 43,516 42,908 42,953 43,997

In addition to reporting financial results in accordance with accounting principles generally accepted in the United States, we provide non-GAAP operating results adjusted for certain items,including: asset impairments; accelerated depreciation expense due to plant consolidation activities; purchase accounting effects related to acquisitions, such as the adjustment of acquiredinventory and deferred revenue to fair value and transaction costs; revenue and cost of sales deferrals for certain acquired product lines subject to software revenue recognitionaccountingrequirements; severance, restructuring, and acquisitionintegration costs; gains (losses) recognized on the disposal of businesses and tangible assets; amortization of intangible assets; gains(losses) on debt extinguishment; discontinued operations; and other costs. We utilize the adjusted results to review our ongoing operations without the effect of these adjustments and forcomparison to budgeted operating results. We believe the adjusted results are useful to investors because they help them compare our results to previous periods and provide important insightsinto underlying trends in the business and how management oversees our business operations on a day-to-day basis. Adjusted results should be considered only in conjunction with resultsreported according to accounting principles generally accepted in the United States.

Twelve Months Ended

(In tho us ands , except percentages and per s hare amounts )

Three Months Ended

Unaudited


Free Cash Flow GAAP to Non-GAAP Reconciliation

December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014

GAAP net cash provided by operating activities 144,429$ 129,262$ 236,410$ 194,028$

Capital expenditures, net of proceeds from

the disposal of tangible assets (15,475) (14,291) (54,436) (43,575)

Cash paid for severance and other costs for the

integration of our acquisition of Grass Valley - 15,935 - 37,720

Non-GAAP free cash flow 128,954$ 130,906$ 181,974$ 188,173$

We define free cash flow, which is a non-GAAP financial measure, as net cash provided by operating activities adjusted for capitalexpenditures net of the proceeds from the disposal of tangible assets and certain cash payments for severance and other costs for theintegration of our 2014 acquisition of Grass Valley. We believe free cash flow provides useful information to investorsregarding ourability to generate cash from business operations that is available for acquisitions and other investments, service ofdebt principal,dividends and share repurchases. We use free cash flow, as defined, as one financial measure to monitor and evaluate performanceand liquidity. Non-GAAP financial measures should be considered only in conjunction with financial measures reportedaccording toaccounting principles generally accepted in the United States. Our definition of free cash flow may differ from definitions used by othercompanies.

Three Months Ended Twelve Months Ended

( In tho us a nds )

Unaudited


Reconciliation of Non-GAAP Measures2015 Revenue and Earnings Guidance

Year Ended Three Months EndedDecember 31, 2016 April 3, 2016

Adjusted revenues $2.295 - $2.345 billion $530 - $550 million

Deferred revenue adjustments ($7 million) ($2 million)GAAP revenues $2.288 - $2.338 billion $528 - $548 million

Adjusted income from continuing operations per diluted share attributable to Belden stockholders $5.10 - $5.40 $0.90 - $1.00Amortization of intangible assets ($1.71) ($0.45)Severance, restructuring, and acquisition integration costs ($0.60) ($0.30)Deferred gross profit adjustments ($0.11) ($0.04)

GAAP income from continuing operations per diluted share attributable to Belden stockholders $2.68 - $2.98 $0.11 - $0.21

Our guidance for revenues and income from continuing operations per diluted share attributable to Belden stockholdersis based upon information currentlyavailable regarding events and conditions that will impactour future operating results. In particular, our results are subject to the factors listed under the SafeHarbor Statement in this slide presentation. In addition, our actual results are likely to be impacted by other additional events for which information is not available,such as asset impairments, purchase accounting effects related to acquisitions, severance, restructuring, and acquisition integration costs, gains (losses) recognizedon the disposal of tangible assets, gains (losses) on debt extinguishment, discontinued operations, and other gains (losses) related to events or conditions that arenot yet known.

earnings release conference calls2.q4cdn.com/591876415/files/doc_presentations/... · q4 2015...

Documents